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of <h1>Textile manufacturer wins refund claim for unutilized ITC under Section 54 despite portal restrictions and revenue authority rejection</h1> <h3>PEE GEE FABRICS PRIVATE LIMITED Versus UNION OF INDIA</h3> PEE GEE FABRICS PRIVATE LIMITED Versus UNION OF INDIA - 2024 (80) G. S. T. L. 287 (Guj.) Issues Involved:1. Eligibility for refund of Input Tax Credit (ITC) under inverted duty tax structure.2. Legitimacy of filing a second refund application for the same tax period.3. Reversal of ITC on capital goods and its impact on refund claims.Summary:1. Eligibility for Refund of ITC under Inverted Duty Tax Structure:The petitioners, a textile manufacturing company, are liable to pay GST at 5% on the sale of fabrics while raw materials are taxed at higher rates (12%-28%). They are eligible for a refund of ITC due to the inverted duty tax structure as per section 54(3)(ii) of the GST Act. Initially, Notification No. 5/2017 barred refunds for unutilized ITC on woven and knitted fabrics, but this restriction was lifted by Notification No. 20/2018, making the petitioners eligible for refunds from August 2018 onwards.2. Legitimacy of Filing a Second Refund Application:The petitioners filed a refund application on 21.06.2019 and received Rs. 14,71,946/-. However, due to the reversal of wrongly claimed ITC on capital goods, the refund amount was reduced. They filed a second application on 08.08.2019 for the balance amount of Rs. 8,06,852/- under the 'any other' category as per Circular No. 94/2019. The authorities rejected this second application, stating that the law does not permit splitting the refund claim for a particular month and that the refund for reversed ITC on capital goods cannot be claimed again.3. Reversal of ITC on Capital Goods and Its Impact on Refund Claims:The petitioners reversed ITC on capital goods amounting to Rs. 10,12,188/- in August 2018. This reversal reduced the refund claim automatically. The respondents argued that the reversal in GSTR-3B is binding and cannot be claimed again. The court, however, found that the petitioners were entitled to the full refund amount of Rs. 22,78,798/- as per Rule 89(5) of the CGST Rules and that the GST Portal's restriction was unjustified. The court noted that Circular No. 94/2019 allowed for a one-time measure to claim refunds under the 'any other' category when the portal restrictions prevented the full claim.Conclusion:The court quashed the orders rejecting the refund and directed the authorities to sanction the refund of Rs. 8,06,852/- with applicable interest. The petition was allowed, and the rule was made absolute to the extent of granting the refund. No order as to costs.
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